Business confidence stays at rock bottom

Business confidence has fallen in all but two UK regions over the past three months with no signs of a "Baghdad bounce".

Only in Northern Ireland and London and the South East did confidence grow, the report by the CBI and Experian Business Strategies said. Northern Ireland grew by plus one per cent and optimism in the South East and London improved three per cent.

The quarterly also predicts that almost 40,000 jobs will be lost in the private sector over the coming three months as profits come under pressure and any spare capacity is axed.

"Firms across the UK are struggling to keep their heads above water, with severe job shedding predicted in almost every region and confidence low," said Doug Godden, CBI Head of Economic Analysis.

"Further rate reductions may yet prove necessary later in the year should the elusive global recovery fail to materialise," he added.

Companies in Wales reported the sharpest drop in confidence with 38 per cent more firms predicting weaker prospects that feeling that things would improve (a balance of minus 38 per cent).

The figure for Scotland is minus 16 per cent, in the North East minus 19, in Yorkshire and the Humber minus two, in the East Midlands, minus eight, in Eastern England minus six, in the south West minus 17, in the West Midlands minus 24 and in the North West minus 20.

Despite the end of the Iraq war, just three regions posted a rise in total orders over the last quarter. However more than half of UK regions said they expected export orders to rise over the next three months.

Companies in all but one region also expect employment levels to fall, with the largest decline forecast in the West Midlands, followed by the South West and Wales. The only rise in employment is predicted in the North West.

In contrast to the CBI survey, however, accountants BDO Stoy Hayward said that prospects for UK PLC were gradually improving. Their ‘optimism index’ of GDP growth two quarters ahead rose to its highest level for a year.

BDO partner Chris Grove said: "In the absence of a shock from the financial markets or a terrorist attack - both of which remain the main threats to business confidence - UK businesses should be able to look forward to modestly improving trading conditions."